The Tyler Group News

Economic good news gives Labour more headaches

Mark Carney's first assured outing as Bank of England governor will not have lifted already depressed Labour spirits. The Bank now expects GDP to rise by 0.6% in the third quarter of this year, rising to 2.6% a year in two years.

In addition, unless employment grows suddenly, he said, he did not foresee any need to raise interest rates above their current 0.5% until 2016, after the election.

If Britain is suffering from the wrong kind of growth – a debt-fuelled housing boom – voters will not have to pay the price until after the election.

To make matters worse for Labour, YouGov polling this week for the first time suggested voters were now evenly split on whether the spending cuts were the right idea. Polling produces different results according to the precise question asked, but it shows a trend towards voters accepting that austerity was the right course for George Osborne to choose.

Even on the more sophisticated left blogs, economists are asking themselves whether austerity was right. (Their answer remains no.)

Osborne himself was jubilant this week, saying the shadow cabinet had not just intellectually but physically left the pitch, deserting the political battleground for the beaches.

Labour in its defence pointed out that Carney had said this remained the slowest recovery in output on record. But Ed Balls has long recognised that growth would return at some point before the election, even if some of his advisers may be privately startled by the optimism of some of the forecasts and surveys emerging from business over the past fortnight.

Labour has long prepared to switch its focus from the lack of growth in GDP to the lack of growth in earnings. Probably a little earlier than they would have liked, it duly unveiled figures this week claiming working people will on average by 2015 have lost a total of £6,600 in real terms during David Cameron's premiership.

It is convinced that headlines or politicians pronouncing boom-boom Britain simply do not resonate with the daily experience of voters; indeed they infuriate voters angry at the boasting an out-of-touch elite.

Stan Greenberg, the American pollster working for Labour, has for instance long warned Barack Obama of the dangers of hailing an economic recovery, and indeed claims the Democrat's desperate performance in 2010 congressional elections was due to his premature efforts to point to recovery.

Recent focus groups undertaken by Greenberg's company in America show that anger has not yet dissipated. In a recent memo, based on focus-group research, he wrote: "People believe that American jobs have been fundamentally restructured to pay less; America is producing jobs 'you can't live off'.

"This may be the biggest change in the perception of the economy and it dominates all other reactions. In the past, people talked about jobs paying 'less' as a consequence of the great recession, but this change in the character of jobs is just given.

"People are consumed by the lack of jobs that pay and the fate of the middle class, but they look right at the top when focused on the rigged political battle that favours the rich and connected. They are animated about the political inequality – the use of lobbyists and money to rig the game for those at the top."

But he also provides – indirectly – a warning to Labour that the personal struggle with debt leads voters to expect governments to be similarly parsimonious. "With families restructured and weighted down by debt, people remain responsive to conservative arguments on debt and spending."

But Labour, still without an election manager, will be watching the slow drift down of its polling in recent months and worry where the Labour vote bottoms.

At the moment the Labour election war book remains without a message or an author.